Immigrants will add $7 trillion to the US economy over the next 10 years

Economists estimate that over 10 years, immigration will increase US GDP by $7 trillion and government revenue by $1 trillion, reports Bloomberg.

Photo: IStock

Last week, in the midst of a series of rows in Congress over border security, the Congressional Budget Office (CBO) released the latest version of its 10-year budget and economic forecast. This is the kind of report that should shake up the immigration debate on Capitol Hill.

According to the latest data, the federal budget deficit will reach almost $10 trillion over the next 20 years, and the debt-to-GDP ratio will be 2033% by 114. Sure, it looks scary, but it's actually an improvement on last year's report: This year's forecast suggests that U.S. gross domestic product (GDP) over the next decade will be $7 trillion higher than last year, with an additional $1 in revenue trillion. More income and a larger economy equal a lower debt-to-GDP ratio.

So what explains the good news? Answer: Immigrants do their jobs.

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“There will be 2033 million more people in the labor force in 5,2 than the agency projected last year. Much of this increase is due to the additional foreign nationals in CBO's new population projections,” the report said.

None of this should be taken as an excuse for lax border security. The current situation is terrible. The asylum system is not working as it should, and people who enter the country and claim refugee status end up in court. The court's decision can be expected for years. This is unfair to people with legitimate claims and presents a huge loophole for those simply looking to work illegally.

The unruly politics at the border make the CBO's findings even more remarkable. Immigrants and immigration are so economically beneficial that even a chaotic, somewhat lawless influx of immigrants has large economic and fiscal benefits.

Imagine how much faster the US could succeed with a properly designed and managed immigration policy. She would deliberately select those who would advance national interests.

How will it look like

Of course, this is politics, so such issues need to be discussed. But there is one important concept - skilled workers. A major downside to the current situation is that while it is relatively easy to come to the US to work illegally, it is very difficult to practice a skilled profession without a visa.

Giving more visas to foreign-born doctors, dentists, programmers and engineers would have the same directional impact on macroeconomic variables (GDP and tax revenue growth, lower debt-to-GDP ratio) as the current influx of asylum seekers. But the value will be much larger because skilled workers receive higher incomes.

Increasing the population at some level is a short-term solution.

The great financial crisis in the United States stems from the burden of meeting the government's obligations to the elderly. And this is where the role of less-skilled workers—those who currently strain the asylum system—comes into play.

Therefore, let them come to the USA and work for a year (or two or three), and then go home. While these people are here temporarily, their employers will pay payroll taxes, as well as Social Security and Medicare (preferential health insurance for retirees). But migrants on a work visa will not be able to receive these benefits. Firstly, because they are not yet retired, and secondly, this money is kept in a special account, and the US government has the right to confiscate it if the temporary worker violates the rules of his visa.

Congress could create a commission to determine which industries would benefit from more workers (child care, agriculture and construction are a good start) and reinstate restrictions during periods of rising unemployment.

Concern about immigrants "taking jobs" is at some level a result of the weak labor market of past years. In today's economy, a shrinking labor force will simply mean higher interest rates from the Federal Reserve (Fed) in an attempt to cool demand. When unemployment is low, additional foreign-born workers not only improve long-term financial prospects, but also keep interest rates lower. They stimulate investment growth and long-term productivity.

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Last but not least, any new immigration program must provide greater choice to local residents.

Some regions of the United States suffer from acute and long-term housing shortages due to poor zoning choices. But other regions suffer from chronic and long-term population loss.

For example, St. Louis has 550 fewer residents today than it did in 000. New Orleans has lost 1950 residents since 1960. Buffalo has lost 250 residents. Chicago, a much larger city, still has nearly a million fewer residents than it did 000 years ago, despite a much more modest percentage decline.

Some of these cities may not need more people, but Congress should give them the ability to allow foreigners in.

As a result, we will get a properly organized flow of people who have legal permission to live and work in the city that sponsored them. This would help the US economy grow without disturbing people who live in other places and have a different view of the situation.

Not everyone will like these ideas. Some opposition to immigration is based on ugly racism, and some on a basic preference for simplicity and homogeneity. But the specific material consequences of migration matter—and, as the CBO confirmed last week, they are quite positive. Voters shouldn't have to put up with chaos at the border, but at the same time, they shouldn't be denied the economic benefits of smarter, more orderly immigration policies.

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